Japan’s Economy Shrinks More Than Expected In Third Quarter
Provisional government data released on Wednesday revealed that Japan’s economy shrank way more than expected in the July-September period. This surprising contraction comes amid slowing global demand and rising domestic inflation.
The provisional gross domestic product fell 2.1% in the third quarter compared to a year ago, after experiencing a 4.8% expansion in April-June. This decline was significantly larger than the anticipated 0.6% decline in a Reuters poll.
Additionally, the world’s third-largest economy also contracted 0.5% in the third quarter from the previous quarter, following a 1.2% expansion in the second quarter from the first. Once again, this contraction exceeded expectations for a 0.1% decline.
These declines mark Japan’s first in four quarters and reflect a pattern of economic instability since the start of the Covid-19 pandemic in early 2020. The country has seen periods of economic expansion alternating with contraction.
The unexpected downturn underscores the complex challenges for the Bank of Japan as Governor Kazuo Ueda contemplates an eventual exit from its ultra-easy monetary policy. It also strengthens the case for the Japanese government’s 13.2 trillion yen ($87 billion) economic package, which will feature subsidies and payouts to low-income households in an effort to mitigate soaring energy and utility bills and to curb rising living costs.
The weaker GDP print was attributed in part to weaker than expected domestic capital expenditure, which contracted 0.6% in the third quarter from the second quarter — a significant contrast to expectations for a 0.3% expansion, according to the same government release.
Moreover, private consumption in Japan was flat in the third quarter from the previous quarter, as both domestic and foreign demand weighed on the economy.
This is a developing story and readers are encouraged to check back for more updates.